Trump May Pardon You, But The Bank May Not

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2:05Capitol four years ago. So this is January 6th. These are the hostages. Approximately 1 ,500 for a pardon. Yes. Full pardon. That was just the beginning of what has been something of a pardoning spree for Trump. Today, it was the convicted founder of the crypto exchange, Binance, Xiaoping Zhao. Last week, it was convicted former Republican congressman George Santos. But it's one thing to be cleared by the president. It's another to be cleared by the banks. And some of the people pardoned during Trump's first term found that out when they were debanked. Joining me is Bloomberg senior reporter Tom Schoenberg.

2:50Tom, Republican fundraiser Elliot Broidy, who was convicted for violating a lobbying law, and former CFO of social media company X, Mahmoud Reza-Banki, who was convicted of making false statements, were both pardoned at the end of Trump's first term. But explain how those White House reprieves only go so far. So both Mr. Broidy and Mr. Bankey kind of recently within the last year or so sought banking services. Both had applied for credit, Broidy from American Express, Bankey from J.P. Morgan, and were denied. And as they pushed for explanation as to why, in both instances, were told that it was due to a criminal record that they had had, you know, that was tied to the pardon that they received from President Trump in his first term.

3:50With Bankhead also meant he had applied for a credit card with Bank of America and a 529 account that involved Fidelity and the same situation. He was denied accounts or denied access to credit. Is there really a term debanked? There is now. Tell us what that means.

4:38to wipe the slate clean. Really, in terms of how it's been interpreted, it really is this erases that legal stain of the conviction, right? And I think in terms of financial services, what these cases are sort of raising to an extent is, does that necessarily override these risk assessments of private lender that are required under law to prevent against money laundering and to know their customer, which usually is a look back on their history, both financial but also criminal history. When you get a pardon, is your criminal record expunged or is there sort of a big red stamp on it, you know, pardon?

5:13So if you go to the criminal dockets, you would see their note that the case was dismissed, or you would see that pardon in there in some fashion. So for Mr. Broidy, he had pleaded guilty to account of conspiring to violate the Foreign Agents Registration Act in October 2020, but he would yet to be sentenced when President Trump pardoned him. So what you see in his record is you see that his attorneys moved to dismiss the case because of that, which then happened. So it's logged there. In terms of Mr. Bankey, he was convicted way back in 2010 of multiple crimes tied to Iranian sanctions. And on appeal, two of those counts were thrown out.

6:01So he had one sort of remaining conviction when he was pardoned for false statements to investigators. So in terms of When you pull up sort of say the press release from the Manhattan U.S. Attorney's Office, at the top, you will see an update on there in red. So the press release stays laying out, you know, extensively what he was convicted of by a jury. But at the top in red, it says, you know, update and it notes both the appellate and then it says, you know, he received a presidential pardon for the fourth conviction. So the record remains. And you can also pull up those cases and you can look at transcripts and see, you know, in the case of Mr.

6:42Broidy, what he said to the judge at the time when he was pleading guilty. Who is representing Broidy and Banky? Yeah, so they're represented by a firm called Share Jaffe. It's a boutique firm here in Washington, D.C. They've really done a lot of work on sort of political conservative causes. They brought cases on behalf of America First Legal, which is an advocacy group that was co-founded by current White House Deputy Chief of Staff Stephen Miller. They've also did a lot on behalf of Elon Musk some years ago when he said he would have legal representation for people that may have been penalized for what they've said on his social media network, Twitter and then X.

7:26And so they famously kind of represented a Disney actress who had lost her job because some postings online. Those are just a flavor of some of the cases that they've brought. Some MAGA people think that conservatives are being debanked for their political beliefs. And you write that it's become an obsession with some, including President Trump. Yes. I mean, President Trump and the Trump Organization has sued Capital One Financial Corps in making accusations that they had improperly kind of closed hundreds of accounts that the Trump Organization had. And Capital One denied any sort of wrongdoing here.

8:06They moved to have the case dismissed. That's in front of a judge right now. And the argument on their end is that they had the right to cancel accounts based on sort of the contracts that they had for those accounts. It's been a personal issue for the president. Additionally, in August, he issued an executive order directly at this issue called Guaranteeing Fair Banking for All Americans, in which he calls out the quote-unquote debanking of specifically conservatives and others for whether political or religious reasons, and orders financial regulators to remove some of the standards they had in reviewing accounts at institutions, as well as kind of looking back and see whether any people's accounts had been closed due to whether political, religious reasons, or some other sort of unfair determination.

9:04So that's ongoing right now. I mean, is there any evidence that banks are targeting, specifically targeting conservatives because of their political views? After January 6th, there were a lot of sort of stories coming out. You know, there was a lot of concern that people were losing their accounts in some way. I mean, banks have a lot of leeway in terms of deciding whether to close an account. They kind of use this term reputational risk. That's kind of a catch-all when sort of making those determinations. And that also includes sort of looking at, you know, news media accounts involving people.

9:47That's one thing they look at. And so I've seen it on sort of both ends. I mean, I think on the Democratic side, Elizabeth Warren and others have also been very vocal about claiming that certain Americans were losing their banking, specifically Muslim Americans, you know, so it has been on both sides of the political aisle. Since the executive order, have banks been making changes?

10:37One of the things that happened after he brought his case over not receiving credit from J.P. Morgan is it happened that he had two accounts at another institution called First Republic Bank, which in 2023 had collapsed and was taken over by J.P. Morgan. and that included two of his accounts. So initially, they had moved to close those two accounts with one of their anti-money laundering executives selling the court due to his earlier conviction. Once this lawsuit was sort of underway and he moved for a temporary restraining order to stop them from closing those accounts, J.P. Morgan kind of reversed itself and they made the decision.

11:21They told us that they looked at, you know, that appeal that he was successful on with some of the criminal accounts. They also looked at it had been 15 years to them that this time had gone by without any other sort of criminal allegation against him. And so they're going to keep those accounts open. So you're also seeing it here at this level in the litigation. Did Broidy ever get an American Express card? Unclear at the moment, but in terms of his matter, his company, Brody Capital, it's an investment firm. And the company had an American Express card. It was under his operations manager's name.

11:59He wanted one for himself. And that's what sort of sparked all this when they denied him. And at the moment, this is still in litigation. In fact, there's a hearing this week in the matter. and on American Express's end, they are telling the judge that they need to dismiss this case because these card member agreements, account agreements, usually require that disputes be handled in arbitration. And from the bank's point of view, explain why they might not want to extend credit to someone who was convicted of a crime, especially financial crimes. Right. Well, it's really a liability issue for the banks that they're making these assessments.

12:36they have to comply under the law that the people who they're giving access to the U.S. financial system to are not going to be using it for illicit purposes. So you have a twofold. One, if someone's a fraudster, the bank itself could later be sued by victims claiming that they didn't do enough. They can also be penalized by the government for not abiding by all the rules and regulations to ensure that we have a safe banking system. So if somebody has some type of financial crime on the record, that's going to be looked at very closely by the bank. You know, in terms of how aggressive they are in this space, talking to a number of defense lawyers, a lot of times people lose their banking even at the first sign of an investigation, let alone a conviction.

13:23So, you know, it's quite common for a bank to receive a subpoena even for records of somebody, you know, related to a case and immediately cut off an account. So someone might learn they're under investigation just by losing access to their banking. It's kind of a large wave in terms of, you know, investigation and losing banking. It's really been a fascinating conversation. Thanks so much, Tom. That's Tom Schoenberg, Bloomberg senior reporter. Support for the show comes from Public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge.

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16:04Make every journey more rewarding with a$300 annual travel credit and access to a network of airport lounges, whether you're looking for pre-flight productivity or time to rest and recharge. Chase Sapphire Reserve for Business. It's the card that gives back all you put in. Learn more at Chase.com forward slash Reserve Business. Chase for business. Make more of what's yours. Accounts subject to credit approval. Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank N.A., member FDIC. The Trump administration got some serious pushback from a panel of Ninth Circuit appellate judges during oral arguments over the administration's deployment of thousands of California National Guard troops to Los Angeles in June.

16:50San Francisco federal judge Charles Breyer had ruled in September that Trump's deployment violated the Posse Comitatus Act, a 19th century law that bars using the military for civilian law enforcement. The Trump administration appealed, and Judge Eric Miller was one of the appellate judges who sounded skeptical that the protests were violent riots that created an exception to Posse Comitatus. He questioned the Justice Department's attorney, Eric MacArthur, about the extent of the protests. Why is a couple of hundred people engaging in disorderly conduct and throwing things at a building over the course of two days of comparable severity to an invasion or a rebellion?

17:44Well, because violence is being used to thwart enforcement of federal law. But violence is used to thwart enforcement of federal law all the time. I mean, like the FBI goes to arrest somebody and he shoots at them or tries to run away. And that happens every day. Right. On the same day the oral arguments took place, Wednesday, the full Ninth Circuit declined to re-year on bank, meaning the full court, another decision allowing Trump's federalization of the California National Guard. If it sounds confusing, that's because it is. And here to help us sort it out is Joshua Kastenberg, a professor at the University of New Mexico Law School and a former judge in the U.S.

18:31Air Force. Josh, let's start with the oral arguments over the Posse Comitatus Act. One of the things the Trump administration argued was that the president has unreviewable power when it comes to deploying the National Guard. One of the things that the administration is arguing is that if you go back to the beginning of the country and you look at this case called Martin v. Mott, which the Supreme Court ruled on in 1827, coming out of the War of 1812, it just took a while for that issue to percolate up to the court, that the president's authority to declare something an emergency is non-reviewable by the courts.

19:18That's what the administration's position is. California's position, New York's position, Illinois position is that's not true, that the president is commander in chief and the commander in chief's orders to his or her troops may be non-reviewable by the courts. but the actual declaration of an emergency or the use of those troops is clearly reviewable by the courts. So those are two different things. And that's central to what the Ninth Circuit is trying to rule on right now. And so did it seem like the judges were skeptical about the government's argument that they couldn't review it? Well, I believe they are.

20:03I mean, when you say government, there are several governments fighting each other in the court. True, true. Let's say the Trump administration. Yeah, I think the judges are skeptical about that. To me, it goes back to the Youngstown Sheet and Tube versus Sawyer decision in the last days of the Harry Truman administration, when Truman tried to make a similar argument. And the thing is, you know, I go back to one of the things that William O. Douglas mentioned in his concurrence in that plurality, which is, if a president is free to declare anything as an emergency, so to abridge the basic rights of the people, then all we'll have in the future is government by emergency.

20:46That it'll just be the idea of a president, the laws in the way, the peacetime laws are in the way. So to avoid dealing with the courts, I'm just going to declare things are an emergency. And I think the Ninth Circuit is skeptical of that argument, as they should be, because, you know, the courts and the country as a whole have already been warned that that argument is a nonstarter when it comes to domestic issues. issues. Another issue was whether Trump had violated the Posse Comitatus Act. So the White House had framed the protests as violent riots. But Judge Eric Miller, a Trump appointee, asked why a few hundred people engaging in disorderly conduct over two days was comparable to an invasion or a rebellion.

21:37And he pushed the Trump administration lawyer on that. Yeah, you know, as he should be skeptical. I mean, a riot, an insurrection, a rebellion, none of them have, you know, really true tight legal definitions. I look at a rebellion and I look at South Carolina militia firing on Fort Sumter in 1861. That's clear that that's a rebellion. politicians have called things rebellions before that are far short of a rebellion or an insurrection and world war one there was a group of farmers in oklahoma who thought they could march on washington dc to prevent the draft from occurring they called it the green corn rebellion it's really just about a thousand farmers it wasn't a rebellion at all and most of them didn't make it out of state so a rebellion or an insurrection is something that either threatens to topple the government or completely prevents the government from fulfilling its functions, whether that's a federal or a state government.

22:40And that's not at play here. You do have people breaking the law. You also have the majority of people simply exercising their constitutional rights of freedom of speech and freedom of assembly. And if a president can call that a rebellion, an insurrection, or an uncontrollable riot, we'll never hear the end of that. That will be used to crush dissent. So I think where the Trump appointee, the judge, is coming down on, and it's something I think we should all take to heart, is this is not a case about whether or not the president can use law enforcement. This is a case about whether the president can use the military as law enforcement.

23:21And that's what the posse comitatus law was drafted to prevent. In 1877, the Posse Comitatus Act comes into being partly as Southern demands to end reconstruction, Southern demands to prohibit the use of the army to enforce civil rights, kind of as a sordid beginning. But also it was a reflection on what the framers of the Constitution feared, which was a standing army being used to police the people, to coerce how they vote, and who would remain in office and who remains in power and the like. Until Donald Trump, the only president that acted in a manner that I would say was heavy-handed was Grover Cleveland.

24:11And Grover Cleveland, though, at least he had a U.S. district court injunction on his side during the Pullman strikes. You know, in the Midwest in 1895, there was a wide-scale labor strike. There were anarchists who were a part of that strike, although most of them were simply following Eugene Debs, who later ran for president. But the strikers were preventing the mail from going on trains. And so that's what Grover Cleveland and his Attorney General Richard Olney latched onto and using the army to suppress the strike. But again, they had gone to the courts first and gotten permission. Here you have the president acting as though the courts don't matter, as though the courts are not a co-equal branch of government, and he can use the military for anything he wants, and it's non-reviewable.

25:04And I think that's where the skepticism comes in from the Trump appointee. But there's one other thing I'd point out. No one is opposing the president enlarging the FBI. No one's opposing the president enlarging ICE or any other federal police force. But the fundamental difference between the FBI or ICE or any other federal police force on the one side and the military on the other is that the president of the United States is not the commander in chief of the FBI. He's still the chief executive. And the FBI is much more free to question a president's orders and to say, the heck with this, and walk off their job, than the military.

25:46And when a soldier, sailor, airman, or Marine gets an order from the president, that soldier, sailor, airman, and Marine operates under a separate legal system, the Uniform Code of Military Justice, and it is the only legal system in the United States which places a burden of proof on the defendant to prove that a presidential order is unlawful, rather than the government having to prove that the order is lawful. So the presumption of everyone in uniform is, the president orders me to do this, I have no choice but to do it. If I don't, I may end up with a dishonorable discharge and a long sentence in a military prison.

26:28And I think that smart judges understand that distinction. And that's why the Posse Comitatus Act is so important, as well as the framers of the Constitution and their division of power, you know, in checks and balances and the fear of standing armies. I mean, there are so many seemingly conflicting opinions out there on Trump sending troops in. So on Wednesday, the full Ninth Circuit declined to hear Newsom versus Trump on bank, meaning by a full court bench. And so that basically upholds the ruling that permits Trump to maintain federal authority over California National Guard troops that were deployed in Los Angeles during the protests.

27:16At the same time, you had these oral arguments also at the Ninth Circuit over whether Trump's deployment of the troops to L.A. violated the Posse Comitatus Act, though that seems to be on its face a conflict. Explain why it isn't. That's a great question. So this is what's going on. No member of the bench, on the one hand, wants to prevent the president from having the authority to federalize the Guard. There would be no desire, for example, if China were to invade an ally or Russia were to invade an ally, that the court should be called to intervene on a presidential call-up. No one wants to spend time in the courts if there's a real, no kidding, real national emergency where the president would have to call up the guard, say a massive earthquake or typhoon disrupts and disables the Eastern Seaboard or California.

28:17So there's a reluctance to intervene in the president calling up the guard, but it's what the president does when the guard is called into federal service or using active duty forces, particularly the Army, which that's what the Posse Comitatus Act covers. This doesn't cover the Marine Corps. There's a fundamental difference between that, what the president does with the military versus calling up. And I think that's what part of the confusion is with these myriad of cases. The other has to do with whether or not a temporary restraining order should stay in effect or not. And just keep in mind that a president or any party may lose on a temporary restraining order, but then win later on on the substantive issue or vice versa.

29:06And so you get all these sort of convoluted decisions. What is the standard? What is the question being raised under the standard? And to the general public who isn't trained in the law, it looks like the court is seesawing between various things and making no sense. But that's really not what's going on. It's that there are these nuanced questions. Coming up next. But what about the conflicting opinions from the Ninth and Seventh Circuits, one allowing Trump to send troops into Portland, Oregon, the other barring Trump from sending troops to Chicago, Illinois? You're listening to Bloomberg. Support for the show comes from public.com.

29:47If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined.